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Southwest shares slide after ending fuel hedging ahead of higher costs
Fuel hedging was discontinued before crude and jet fuel prices rose, leaving the airline more exposed to energy costs, even as it beat profitability targets in its latest quarter.
Southwest Airlines stock has dropped about 16% over the past month after investors reacted to forward-looking concerns tied to energy costs, according to Yahoo Finance. The outlet also links the move to a Barchart Technical Opinion indicator that issued a 40% Sell rating.
Yahoo Finance notes that Southwest reported second-quarter results that exceeded profitability targets, although revenue came slightly short. The company also highlighted changes to its product, including a shift toward assigned seating and extra-legroom configurations aimed at capturing higher-margin premium passenger spending.
The main driver for the selloff, according to Yahoo Finance, was fuel hedging vulnerability. The airline discontinued its fuel hedging program right before crude oil and jet fuel prices surged, exposing it to higher energy costs and prompting analysts to adjust expectations for the stock.
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